- Bloomberg
HONG KONG: I Squared Capital’s potential takeover offer for Hong Kong Internet provider HKBN Ltd is facing hurdles, as it tries to convince China’s sovereign wealth fund of the merits of the deal and a competing state-backed bidder built a significant stake.
Rival suitor China Mobile Ltd agreed to acquire a 15.5% holding in HKBN from buyout firm TPG Inc at HK$5.23 or about 67 US cents per share, the same as its planned offer price for the whole company, according to a Hong Kong exchange filing last Wednesday.
China Mobile said it plans to complete the purchase no later than Nov 28.
While TPG had previously pledged to support China Mobile’s takeover offer, that agreement allowed it to pull out if a higher bidder emerged.
The latest deal effectively gives state-backed China Mobile a blocking stake that could prevent another suitor from getting full control of HKBN and taking it private.
In addition, China Mobile said in a filing late last Thursday that China’s State-owned Assets Supervision and Administration Commission had approved its offer for HKBN.
Approvals from the National Development and Reform Commission and the Commerce Ministry remain outstanding, it said.
Miami-based I Squared already owns broadband operator HGC Global Communications Ltd, where sovereign fund China Investment Corp (CIC) is a minority investor, and wants to combine it with HKBN.
So far, I Squared hasn’t been able to secure approval from CIC to move forward with a formal offer for HKBN, people with knowledge of the matter said.
The infrastructure investor has been working to line up more equity co-investors for its potential offer, the people said, asking not to be identified because the information is private.
It’s also been analysing the possible antitrust implications of a deal, according to the people.
While I Squared continues to work on a potential bid, the hurdles could make it difficult to move forward if they’re not resolved, the people said.
HKBN said in an emailed statement last Thursday that its board is still evaluating its options, and negotiations with China Mobile and I Squared are active and ongoing.
The board hasn’t formed any definitive views or reached any legally binding agreement with either party, HKBN said in its statement.
A representative for I Squared declined to comment, while a spokesperson for CIC didn’t immediately respond to emailed queries.
Bloomberg News reported in January that I Squared was moving toward an offer that could rival China Mobile’s proposal.
HKBN’s shares were up 1.6% to HK$5.15 at 9:20am last Thursday in Hong Kong, giving the company a market value of about HK$7.2bil or about US$926mil.
HKBN said in a stock exchange filing last week that I Squared had completed its due diligence and was finalising terms of a possible pre-conditional offer, along with details of its financing, though negotiations were ongoing.
HKBN’s shareholders include private equity firms MBK Partners and TPG Inc. — Bloomberg
